South Korea Will Have to Spend USD 4,700 Million to Normalise Shipping Capacity

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The South Korean shipping industry will have to spend a minimum of KRW 5 trillion (USD 4,700 million) to return its shipping container capacity to normal levels, a report has claimed.

According to the report released by the Korea Maritime Institute on Wednesday, Hyundai Merchant Marine, which is the largest shipbuilding company in South Korea, will have to secure an additional shipping capacity of nearly 2.92 million twenty-foot equivalent units (TEUs) to be on a par with the 2M alliance’s average level.

Currently, Hyundai Merchant Marine’s container cargo capacity remains at 350,000 TEUs, falling far behind the likes of the Ocean Alliance, and THE Alliance for which the numbers stand at around 1.22 million and 232.7 million TEUs, respectively.

The analysis comes after the South Korean shipping industry suffered a major setback following Hanjin Shipping’s bankruptcy. Hanjin, which was once the country’s number one shipper, had a liquidation value, estimated at KRW 1.79 trillion (USD 1680 million), according to an accounting firm earlier this year.

For the South Korean shipping industry to have a similar cargo capacity to other major shipping nations, an additional 208,000 TEUs needs to be secured, which could cost between around KRW 4.5 billion (USD 4.2 million) and KRW 21.5 billion (USD 20.02 million), the Korea Maritime Institute said.

This also means a minimum of 16 new 13,000 TEU container ships need to be built to carry the additional cargo.

While the Korea Ocean Business Corporation, a new group set to be launched this year, could use its initial capital of five trillion won to increase the shipping industry’s cargo capacity, the report argues for a more effective approach to capital management, given the other roles the corporation will take on including investment, surety, and research and development.

With the partnership between Hyundai Marchant Marine and the 2M Alliance coming to an end next year, the Korea Ocean Business Corporation is being urged to place shipbuilding orders as soon as possible, the Korea Maritime Institute said in its report.

In order to fund the shipbuilding projects, the report called on the Marine Finance Center and other policy organisations to take a leading role in securing capital, including efforts to attract investment from the private sector.

The report also cited mergers and acquisitions between shipping companies as a potential means to offset the cost of raising overall cargo capacity.

Sea News, January 4

(Source: The Korea Bizwire)

Baibhav Mishra
Author: Baibhav Mishra

Associate Editor, Sea News